Transcript: Speed of Innovation

This is a partial transcript from "Your World with Neil Cavuto," August 2, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Say this about my next guest: He is a survivor.

When his RealNetworks (RNWK) Web audio and video was really taking off, most thought his old employer, Microsoft, would bring it down. It didn't.

Then came Apple's iPod (search), which most assumed would prove the new real deal on all things audio. It hasn't, and all because one Rob Glaser innovated faster than his rivals intimidated.

With us now, the man whose latest earnings once again beat the Street, coming in at 3 cents a share, erasing a year-ago loss, again beating estimates.

Rob, good to have you.

ROB GLASER, CHAIRMAN & CEO, REALNETWORKS: Neil, great talking to you.

CAVUTO: What was the secret?

GLASER: Growth, basically.

Our revenue grew 26 percent. Music grew over 60 percent. Games grew over 60 percent. And it's something we said all along, which is, we are in these big businesses. They're big categories. They're not winner-take-all businesses. And we have a different approach than Apple in music. We are very focused on subscriptions. We're the leader. We now have over 1.15 million subscribers, over two million subscribers overall. And it just keeps growing the business.

CAVUTO: So, what would you make of those who had tried to bury you, thinking that, you know, RealNetworks would be replaced, that Rhapsody would be dead? It doesn't appear to happen.

I'm wondering if it's a rising tide lifts everybody's boat and everyone can profit or something more going on here?

GLASER: Well, I would say, certainly, there will be multiple winners, which is part of the rising tide argument.

In terms of why we're one of the winners, I think it's a combination of, you know, persistence, innovation, execution and products that customers love. Like, for instance, one of the things we launched is this new thing Rhapsody 25, which allows anybody to get free legal music.

It's first time anybody has done it. We had three times the number of people sign up once we launched this new product than we had before. So, we're always constantly looking to innovate, looking to do new things that haven't done before. And, you know, we're long-distance runners. We have been doing this for 11 years, and, health and everything willing, hope to be doing it for a lot longer.

CAVUTO: What do you make of the fact that now music has become essentially a commodity on the Internet or wherever you are going to get it, record stores are passe, but that, to make money on it, it's going to be next to impossible for guys like you?

GLASER: Well, I mean, we grew our music revenue. And in fact, our gross margins overall went 70 percent up, from 66 percent. So, we're seeing a lot of ways.

I mean, the biggest thing we're doing in music that's different from maybe six months ago is, we're diversifying the ways we do business. So, we have this free Rhapsody 25 product. We have a bundled distribution relationship with Comcast. You mentioned their earnings. They're a great partner.

They offer our premium radio product, Rhapsody Radio, to all 7.5 million of their high-speed Internet subscribers. So, we have a set of ways that we're working to innovate. And I think that's what you have got to do. I think, if you just try to do one thing in digital music, it's probably hard to build a scalable business. But if you have got multiple irons in the fire, we think you can build a good business.

CAVUTO: All right, Rob, always good having you. Thank you very much.

GLASER: Great talking to you, Neil.

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